Cultural consideration is one of the major factors to be focused by the contemporary business organizations. This is due to the reason that majority of the large scale business organizations are operating in global basis with having diverse sets of employees and catering to diverse customers across the world. Thus, in this case, it should be noted that different employees from different social and cultural groups are having different sets of values and approaches, which should effectively managed in order to have an effective process of decision making (Awadh & Saad, 2013). Moreover, the cross cultural factors can be contradictory in nature and it is difficult to manage them in order bring consensus among all the internal stakeholders. Thus, the cultural differences between the home and host countries of the organizations should be considered to have lower issues in the decision making process.
Speaking about the global brands from New Zealand, Fonterra should be considered at first. This is due to the reason that they are largest company in New Zealand and constitutes of 30 percent of the total milk exports across the world. Thus, they can be considered as one of the major and leading brands in the global business scenario. It is reported that currently, they are having more than 21000 employees across their business operations and this includes employees from different social and cultural groups. China is the largest market for Fonterra in terms of sales revenue and volumes. Thus, it is important for Fonterra to coordinate cultural factors of China and New Zealand.
This report will discuss about the importance of cross cultural management along with its evaluation. In addition, the cultural differences between China and New Zealand will also be identified on the basis of Hofstede’s cultural dimensions and the major factors will be identified (Vasile & Nicolescu, 2016). The influence of the cross cultural factors on the decision making process of Fonterra will also be discussed and critically analyzed.
Importance of evaluation of cultural dimensions
Understanding the differences between home and host country
As discussed in the above section, it is important for the global organizations such as Fonterra to evaluate the cultural dimensions in managing their diverse workforce. According to Sultana et al., (2013), one of the major reasons of evaluating the cultural dimensions is enhancing the organizational performance. This is due to the reason that if the cross cultural issues can be evaluated effectively, then it will be beneficial for the organizations to have the proper understanding about the differences in different regions of operation. Thus, in accordance of the identified differences, business strategies can be designed by them. The authors have also stated that if the issues and challenges that can get emerged from the cultural differences are being identified that then it is more likely for the business organizations to the gain competitive advantages in the host country.
Understanding the differences between the employees
On the other hand, it is stated by Mor, Morris and Joh (2013) that evaluation of the cross cultural dimensions will also be beneficial in determining the differences between the employees. This is due to the fact that in the global organizations such as Fonterra are having employees from different social and cultural groups. With the help of the evaluation of the cultural factors, the differences between the diverse workforces can be identified and based on that, the human resource management approach can be initiated. The authors have also stated that in the current competitive business scenario, effective management of the employees is important for gaining competitive advantages. However, these human resource strategies cannot be effective if the respective cultural factors of the employees cannot be maintained. In this case, the evaluation of the cultural factors will be beneficial for Fonterra to understand the cultural differences and consider their requirements accordingly. This will ensure that the human resource strategy of Fonterra will be the best fit for the organization.
Enhancing the customer service process
Fonterra is operating in highly competitive consumer goods market and thus effective determination of the customer taste and preference pattern is important. As per Matsumoto and Hwang (2013), the major challenge for the global business organizations is to manage the diverse trends of the customers from different regions. It should be noted that cultural differences are one of the major influencing factors for the taste and preference pattern of the customers. Hence, in the case of Fonterra, effective evaluation of the cultural dimensions will help to identify the different influencing elements for consumer behavior and offer the products and design the service delivery process accordingly. For instance, there are differences between the service and product approach of Fonterra in China and New Zealand is different based on their respective cultural factors and trends.
Cultural differences between New Zealand and China
As discussed in the above section, Fonterra is based in New Zealand and China is their largest market in terms of sales volume and revenue. Thus, it is important for them to coordinate between the cultural factors of China and New Zealand. However, it should be noted that cultural factors of both these countries are different to some extent and these differences should be considered in the decision making process. Hofstede’s cultural dimension model will be used to identify the major differences between the two countries.
One of the major cultural differences between China and New Zealand is the power distance. This refers to the extent to which the power is equally distributed between the less and more powerful groups in the country and hierarchy is accepted in the society. In terms of this dimension, China scored at 80 while New Zealand is in 22. This denotes that hierarchy is largely accepted in the Chinese society while it is not evident in New Zealand. In addition, this also denotes that of formal authority is being followed in China, which is not in the case of New Zealand (Mazanec et al., 2015). Thus, it can be concluded that Fonterra should have formal organizational structure with high hierarchy level in their operation in China. This will enable them to motivate their employees by means of promotion and development. As per the power distance of China, employees will be motivated by means of getting more power. On the other hand, according to the power distance of New Zealand, authoritative style of management is not being followed by Fonterra. The major challenge in this case for Fonterra is managing the different approaches with global workforce. This is due to the reason that there are employees from China working in the New Zealand operation and vice versa (Venaik & Brewer, 2013).
Individualism refers to the extent to which the social trends are being influenced with the collectivist approach. Thus, societies with having preferences for the individualistic approaches are more individualism in nature. In terms of this dimension, China scored 20 while New Zealand is standing at 79. This huge difference is denoting that Chinese culture is highly collectivist in nature and opposite in the case of New Zealand. Thus, it is important for Fonterra to ensure the social benefits for the employees in their Chinese operations (Beugelsdijk, Maseland & Van Hoorn, 2015). This is due to the reason that employees in the Chinese operations will get motivated if they are getting social commitment such as social recognition and cooperative treatment in the workplace. On the other hand, New Zealand is individualistic society and thus it is important for Fonterra to focus more on incentives and remuneration to motivate their employees.
Masculinity defines to the extent to which the society is being driven by the success rate and achievement while the feminine society defines the society with having more preferences for the quality of life and care for others. In terms of this dimension, China is ranked at 66 and New Zealand is at 58. This denotes that both the countries are masculine in nature. However, the masculinity of the China is more compared to New Zealand (Dartey-Baah, 2013). Hence, it is important for Fonterra to offer challenging working environment for the employees across their operations in both the countries. Moreover, the employees should be paid proper remuneration, which will them to replace their personal preferences with organizational commitment. However, it should be noted that challenges for Fonterra in this case will be lower as both the countries possess a similar type of cultural trends (Samaha, Beck & Palmatier, 2014).
Uncertainty avoidance refers to extent to which the cultures and societies feel threatened by uncertain situations and the degree to which they are open to uncertainties. In terms of this dimension, China scored at 30 and New Zealand is scored at 49. This denotes that New Zealand is more threatened towards the uncertainties over China. It is also reported that adaptability of the Chinese culture is more to that of the New Zealand. Thus, Fonterra will have fewer challenges in initiating innovative approach in their operation (Garcia-Gavilanes, Quercia & Jaimes, 2013). This is due to the reason that initiation of the innovation will be perceived as uncertain and probability of resistances from the side of the employees will be more. It is a major challenge for Fonterra to initiate the innovative strategies to gain competitive advantages along with the managing their employees by preventing their negative perception towards uncertainty.
Long term orientation
Long term orientation refers to the extent to which the society is comfortable with the change in the long standing tradition and having high level of acceptances towards the modifications of the time honored traditions. In terms of this dimension, China is having the ranking of 87 and New Zealand is having the ranking of 33 (De Mooij, 2013). This denotes that China is having pragmatic culture with having high level adaptability towards the newer trends over traditions. On the other hand, New Zealand is having normative society, which denotes that traditions are majorly preferred over the newer trends. Thus, Fonterra is more in the competitive position in operating in China that in New Zealand due to the reason that they do not have to consider the traditions in initiating their human resource management strategy (Maleki & de Jong, 2014).
Thus, it can be concluded that based on the Hofstede’s cultural dimensions, there are number of cultural differences between China and New Zealand identified. In regards to these differences, it is important for Fonterra to ensure the effective management due to the reason that these factors will have influence one the decision making process. The following sections will discuss about the different influences that these cultural factors will have on the decision making process of Fonterra.
Influence of the cultural dimensions in management decisions
Employee management decisions
One of the major influences of cultural factors is on the decisions regarding the employee management. This is due to the reason that according to the best fit strategy of human resource management, strategies and approaches should be initiated on the basis of the cultural factors of the employees. According to Bird and Mendenhall (2016), if the business organizations are having employees with having more acceptances for power and hierarchy level, then strategies such as promotion and offering more responsibilities will be effective in managing them. On the other hand, if the employees are having preferences for more equal power distribution, then strategies such as cooperative working environment and involvement in the decision making process should be initiated. It is also should be noted that employees with having the preferences for equal power distribution will expect lower gap with the upper level management. Thus, as per the authors, it can be concluded that human resource management of the employees should be based on their cultural preferences.
In the case of Fonterra, their employees from China and New Zealand are having different sets of cultural dimensions. In accordance to that, authoritative style of management should be implemented in the Chinese operations and cooperative style of management should be implemented in New Zealand. This will help them to ensure that maximum return is being gained from the employees of both the countries.
Decision making process
Cultural dimensions are also having influence on the business level decision making process. This is due to the reason that there are different types of decision making process being followed in the organizations and they are being practiced on the basis of the cultural dimensions of the workplace. According to Gelfand et al., (2017), direct approach of decision making process will be effective in the case of the individualistic society as the social involvement of the employees. This is due to the reason that in the individualistic society, employees are less socialistic in nature. On the other hand, if the employees are majorly from the collectivist society, then the decision making process should be more holistic as collectivist individuals are more preferred towards having collective effort.
In the case of Fonterra, they are having both individualistic and collectivist sets of employees in their Chinese and New Zealand operations. Thus, the decision making process of them is also getting influenced by the diversity in the cultural dimensions. It is evident in having different management decision making process being followed by Fonterra in China and New Zealand.
Risk taking decisions
Risk taking decisions are also important for the business organizations in order to take the calculated risks in the industry and gain competitive advantages. However, risks should be taken by the businesses on the basis of their internal factors including the cultural factors. This is due to the reason that according to Dutta and Dutta (2013), it is the cultural dimensions and preferences of the employees and other internal stakeholders, which are having the influences on the risk taking ability of the business. The authors have also stated that if the employees are having higher threats of uncertainty then the risk taking ability of the company will be limited. On the other hand, if the employees are more positive towards the uncertainties, then the risk taking ability will be more for the company. This is due to the reason that employees will be able to deal with future uncertainties effectively.
In the case of Fonterra, they are facing both the factors from the side of the employees. This is due to the reason that employees from New Zealand feel more threatened towards the future uncertainties compared to the employees from China. Thus, the risks taking and innovations should be initiated by Fonterra majorly in their Chinese operations in order to tap the sense of adaptability of the employees. On the other hand, it will be the safer option for Fonterra to follow defensive strategy and traditional approach in terms of the business level strategies.
Apart from the importance of the cultural evaluation in internal management, it is also important to manage the external stakeholders also. This is due to the reason that in the global business organizations, target customers also belongs from different and diverse social and cultural backgrounds and accordingly their taste and preference patterns are also being influenced. According to Satterfield et al., (2013), evaluation of the cross cultural factors will help the business organizations to have the effective decision making process regarding their customer management by means of providing proper services and products. Moreover, it should also be noted that with the help of the effective process of cultural evaluation, business organizations can be able to identify differences in requirements and expectations of the targeted customers and can offer their value propositions accordingly. For instance, expectations regarding the service delivery process for the same product will be different in two different locations. Therefore, it is important for the business organizations to evaluate these differences and design the service delivery process accordingly.
In the case of Fonterra, it is identified that they are dealing with pragmatic types of customers in China compared over the customers in their home country. Thus, they should have more innovative types of service delivery process along with having newer sets of products, which will be one of the kinds in the market. Given the long term orientation of the Chinese society, Fonterra is having higher sets of chance of getting succeeded there. On the other hand, social traditions and customs should be maintained in the service delivery process and product strategy in doing business in New Zealand. This is due to the reason that customers in New Zealand are more normative in nature and they will prefer the process aligned with their long standing traditions.
- It is recommended that Fonterra should have adaptive strategy in their global business operations. This is due to the reason that initiation of the adaptive strategy will be beneficial for them in designing the organizational process according to the different cultural patterns in different locations.
- It is also recommended that the leadership style of Fonterra should be decentralized in nature in order to have different approaches on the basis of the local cultural dimensions. On the other hand, if centralized leadership approach is being maintained, then it will not have same level of effectiveness in different regions of their operation.
- Fonterra is recommended to initiate the geocentric process of staffing in order to have more globalized workforce. With the help of the geocentric style of staffing, Chinese and New Zealand operations of Fonterra will have global workforce and thus the requirement to have different management approach can be reduced in the long term.
This report concludes that global organizations such as Fonterra should have the effective process of evaluation of the cultural dimensions in order to have the better management decision making process in place. In this report, there are number of important factors being identified, which prove that with the help of effective cultural dimension evaluation, Fonterra can gain competitive advantages. Moreover, it is also being identified that based on the Hofstede’s cultural dimensions, huge differences are being identified between the cultural factors of China and New Zealand. It is concluded that Fonterra should initiate their decision making process according to these differences. This will ensure that the management approach of them will be in line to the local cultural trends
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